Management Theory

and Practice

Planning function
 1. Meaning of Planning
 What is Planning?
 Planning
 The dynamic process of making
decisions today about future action
 Preparing today for tomorrow (future focus)
 The activity that allows managers to determine
what they want & how to get it
 A process of deciding what to do & how to do
it before action is required

2
Cont’d…
 Generally, planning is a selection or
choice among alternative as to:
 What is to be accomplished/achieved? (mission, goals or
objectives)
 What action should be taken? (the necessary measures to
be taken)
 What resources employed? (resources necessary to reach
the goals)
 How the end can be achieved/accomplished? (the specific
steps/methods to reach the goals)

3
Cont’d…
 Generally, planning is a selection
or choice among alternative as to:
 When to achieve it? (the time frame in
which it will be accomplished)
 Who is to do it? (the people who will perform the
task)
 Where to do it? (the place where the
plans or planning will be implemented)

4
Cont’d…
 Thus, planning bridges the gap b/n where we are
now & where we want to be
 The outcome of the planning function is a plan, a
written document that specifies the course of action
a firm will take
 Planning is the systematic process of establishing a
need & then working out the best way to meet the
need, within a strategic framework that enables to
identify priority & determine operational principles
5
Cont’d…
 Planning means thinking about the future
so that you can do something about it now
 This doesn’t necessary mean that
everything will go according to plan
 However, the main perquisites plan
properly are & adjustas requiredwithout
compromising the overall purpose

6
2. Nature of Planning

 The contribution of planning

 Organizations exist to
accomplish specific purpose or
 objective
Hence, any has to facilitate the
plan
accomplishment of organizational
objectives

7
Cont’d…
 The primacy of planning
 Planning precedes the of all other
execution
 managerial
Because all function
other managerial functions must be
planned if they are to be effective
 Example: controlling would be
unthinkable
without a planning
 Because any attempt to control without a plan is
meaningless
 Plans thus furnish the standards of control
 Actually, planning & controlling are inseparable 8
Cont’d…
 The
pervasiveness/universality of
planning
 All managers at all levels participate in
planning the character & breadth of
 However,
planning varies with each managers
authority
 Each & every of human
aspects endeavor has to
be planned 9
Cont’d…
 Planning & information
 Basically, no plan without
exists information
 To planmanagers have gather
to relevant information
 Therefore, information is vital for
proper planning

10
Cont’d…
 Planning is a continuous
process
 Planning deals with the future & the
future is full of uncertainties
 Hence, planning needs frequent
revision in response to changes in the
internal & external environments of the
organization

11
Cont’d…
 Planning is a means to an end
 Planning is not an end by itself but
it is a means to an end
 Planning is an instrument that
pushes people towards the
achievement of objectives

12
Cont’d…
 Plans arranged in a
are
hierarchy first set for the entire
 organization
Plans
 The corporate plan then provides
are
the framework for the formulation
of divisional & departmental plans

13
 3. Importance of Planning
 The combination of a good strategic
framework (arrived at through strategic
planning) & a good operational/action
plan
 Provides a clear understanding of what you
need to do in order to achieve your
development goals
 Guides you in prioritizing & making decision
 Allows you to focus limited resources on the
actions that will benefit your work the most
14
Cont’d…
 Keeps you in touch with your
context-
global, national & local
 Provides a tool to help you
communicate your intentions to others
 Provides a coherent guide for
day-to-day
implementation
 Generally, it is important to think about
the benefit of planning
 However, there are many excuses for not doing
it & just getting on the work 15
Cont’d…
 Sometimes seems easier not to
it plan,
 because:
Good planning takes time & money, However,
if it is done well, it is worth the investment
 It is true that sometimes you can be successful
– if you are lucky, But that can be costly &
confusing, as well as inefficient (poor use of
resources)& ineffectual (no achieving desired
results)

16
Cont’d…
 Planning is only useful if people are
committed to implementation-that is true.
But, don’t use this an excuse for not planning,
along the lines of: “no-one ever follows the
plan, so why bother?
 It is the role of the leadership in the
organization to make sure that planning is
useful & gets implemented
 People implement the plan if they participate
in the planning, as long as it makes sense & is
possible
17
 Cont’d…
 Provide direction sense of
& purpose
 It is trough that we can
planning our objective
establish
 Plans focus attention on specific targets
 It provides direction & a common sense
of purpose
 This shared purpose enables both
managers & employees to coordinate,
unite, & guide their actions
18
 Cont’d…
 Reduces uncertainty by
anticipating the future & preparing for
change
 Planning is based on systematic & careful
forecasts of future states of the economy,
markets, technology, etc. to reduce
uncertainties
 Anticipating & preparing for possible future
changes enables managers to control their
environment to some extent
 Thus, planning answers “what if” questions in
order to reduce the risk of unpredictable future
through developing alternatives
19
 Cont’d…
 Provides basis for controlling
 Standards/controlling mechanisms/ are
developed during planning
 It specifies what is to be accomplish &
provides a standard for measuring progress
 Forces managers to see the organization
as a system
 Planning for one part affects the operations
of the other & the whole organization so far
as parts of an organization are
interdependent
20
Cont’d…
 Promotes efficiency
 Planning provides the opportunity
for a greater utilization of the
available organizational resources-
determination of:
 How much resources are necessary to
reach the goals?
 How to use these resources?

21
Cont’d…
 Provides the basis for cooperative
& coordinated effort
 Management exists because the
work of individuals & and groups in
organization must be coordinated
 This can be done through planning
by defining the objectives of the
organization & the means for their
achievement
22
Cont’d…
 Develops the ability of managers
 The act of planning involves high level of
intellectual activity- deal abstract
&uncertain ideas
 Planning makes managers proactive
rather than reactive (make things
happen rather than let things happen)
 Planning develops managers ability to
think futuristically & sharpens managers
ability to think critically

23
Cont’d…
 Provides guideline for decision
making
 Decisions in an organization will be
made in alignment with the plan & in
accordance with desired outcomes
 Planning serves as a framework for
decision making- managers think
analytically & evaluate alternatives to
make decisions
24
4. Limitation of Planning
 It is a difficult & complicated
task
 Involves interdependent decisions
 Requires patience & commitment
from those who are involved in the
planning process
 Affected rapid changes in
by
technology, customers, tastes &
preferences
25
Cont’d…
 It is expensive & time consuming
 Requires much financial, physical, human
&
 time
Thus,resources
collecting the necessary data,
of organizing, analysis & interpreting
consumes
much time & other resources
 It is affected by external factors
 External factors can put strain on the success of
planning
 Government intervention- investment,
taxation 26
& labor laws, etc.
5. Planning Process
 As a managerial activity planning
has its own process/series of
steps
 These steps are interrelated &
there is no rigid boundary among
these steps

27
Cont’d…
1. Establishing objectives
 Objective setting is an first
important step in the planning
 process
Objectives specify the expected results &
indicate what is to be done
 Objective can be set after:
 Assessing the present
situation & anticipating future
conditions
 Assessing organizational
strengths & 28

available opportunities
Cont’d…
 Organizational objectives
are arranged in hierarchy:
 Objectives entire
for the
 organization
Objectives for different divisions
 Objectives for
departments & units,
etc.
 However, there must be coherence
& consistency b/n the objectives 29
 Cont’d…
2. Developing premises
 Planning premises are assumptions about
the environment within which the plan is to
be carried out
 Thus, managers have to investigate the
firm’s environment to know factors that
facilitate or impede the attainment of the
objectives
 Examining external & internal factors which
affect the performance of the organization
(i.e., SWOT)
30
Cont’d…
 The key element of planning at this
stage is forecasting
 Because the future is so complex, it
would not be realistic to make detailed
assumption about the future
environment of the plan
 Therefore, premises are limited to
assumptions that are critical to plan
(i.e., those that most influence its
operation)
31
Cont’d…
3.Determining alternative
actions
 There are several alternative
courses of actions that are available
to a manager to reach a goal
 Usually the most common problem
is not finding alternative but
reducing number of alternatives so
that the most promising may be
identified
32
 Cont’d…
4. Evaluating alternative courses of action
 Having sought out alternative courses,
managers evaluate the benefits &
disadvantages of alternative courses in light of
their weight to goals & premises
 Because there are so money alternative
courses in most situations & evaluation can be
extremely difficult
 This is a step in planning process that
operation research & computing techniques
have their primary application to the field of
management 33
Cont’d…
5. Selecting a course of action
 This is the point at which the plan to
be adopted is chosen or selected
real point of decision-making
 The analysis of each alternatives
benefits & disadvantages should
result in determining one course of
action that appears better than the
others
34
Cont’d…
6.Converting plans in to
budgeting
 Plans will have meaning when they
are changed into numbers
 Budgeting is setting important
standards against which plans can
be measured

35
 Cont’d…
7. Implementing the plan
 After the optimum alternative has been selected,
the manager needs to develop an action plan to
implement it
 This is a step where by the entire organization
will be in motion or real operation
 Implementation involves determining:
 Who will be involved (employee)
 What resource will be assigned (other resources
excluding people)
 How the plan will be evaluated (procedures)
 What look like the reporting
procedures
(hierarchy of r/n ships) 36
Cont’d…
8.Controlling & Evaluating the
results
 Controlling & evaluating refers to:
 Monitoring the progress that is bring
made, evaluating the reported results,
making any necessary modification
 The plan may have to be modified since:
the environment constantly change and
the plan itself may not quite “perfect”
during its development

37
6. Types of Plan
 Plans can be classified on
different bases or dimensions:
 Scope/breadth,
 time
 use (i.e., repetitiveness)

38
Cont’d…
1.Scope / breadth dimension
refers to the :
 Comprehensiveness of the plan
 Level of management where the
plan is formulated
 Based on scope/ breadth, plan can be
classified into: strategic, tactical &
operational – hierarchy of plan

39
Cont’d…
 Strategic plan-
is organization wide plan that is
formulated by top-level management
in consultation with the board of
directors & middle level managers

40
 Cont’d…
 Characteristics of strategic plan:
 It require looking outside the
organization for
threat & opportunities
 It require looking inside the
organization for strength & weakness
 It takes/ covers a relatively long
time horizon
 (>=
It is 5expected
years) in a relatively (non-
 It tends to be top management responsibility
general
specific) terms
 It serves as a premise for tactical plans 41
Cont’d…
 Tactical plan –
 Refers to the implementation of
activities & the allocation of
resources necessary for the
achievement of the organization’s
objectives
 Example
 What is the best pricing policy?
 Which market is suitable for marketing
our products?

42
Cont’d…
 Characteristics of tactical plan:
 It is an intermediate plan
 It is specific & goal oriented than strategic
plan
 It is developed by middle level management
in consultation with lower level
management
 It supports the implementation of the
strategic plans
 It is concerned with shorter time frame (1-5
years)
 It serves as a premise for operational plans
 It is narrower in scope but more detailed
than strategic plan
43
Cont’d…

 Operational plan –
 is concerned with the day to day
activities of the organization and
formulated by the
management in lowerconsultation level
middle level management
with

44
 Cont’d…
 Characteristics of operational plan:
 It spells out specifically what
must be accomplished to achieve
specific goals
day
 It use of resources
is concerned allocatedday
with the efficient to toa
department manager’s area of
responsibility
 It has relatively short time frame
(<=1year)
 It is the most detailed
(specific) &
narrowest plan
45
 Cont’d…
 Operational plan –
 Example
 What production technique is best?
 What material are needed for
operation?
 Unless operational goals are achieved,
tactical & strategic plans will not be
successful- goals will not be achieved

46
Cont’d…
2. Time dimension
 refers to the periods for which the
planning is intended. Based on the length
of time a plan covers, three type of plans
are identified:
 Long range (five years or more)
 Medium range (b/n one & five years)
 Short-range (one year or less)

47
Cont’d…
 Note:
 All strategic plans are long
range plans
 All tactical plans are
medium- range plans
 All operational plans are
short term- range plans

48
Cont’d…
3. Use dimension
 refers to the extent to which plans will
be used on a recurring basis, i.e.,
frequently
 Based on this dimension, there are two
types of plans:
 Standing plan
 Single use plans

49
Cont’d…
 Standing plans:–
 provide an ongoing guidance for performance
recurring activities
 They are formulated to be used again &
again for the day to day operations of the
organizations –for repetitive actions
 They are valuable under relatively stable
situations
 Once established, they allow managers to
conserve time used decision-making of
similar activities
50
Cont’d…
 Example
 A bank can easily approve or reject
loan if criteria are established in
advance to evaluate credit ratings,
collateral assets, etc.
 The major types of standing plans
are policies, rules, & procedures

51
Exercise

 Briefly discuss standing

plans such as policy, rule &
procedure

52
Cont’d…
Policy
 Is a general guide that specifies the
broad parameters within which
organizational members is expected to
operate in pursuit of organizational
goals
 Is a general statement or
understanding which guide or channels
thinking & actions in decision- making
to achieve organizational goals
53
Cont’d…
Rules
 Spells out specific required actions
or non-action, i.e., action that must
be or must not be taken
 Involves allowing no discretion, in
a given situation

 Example – no smoking,
photographing prohibited, etc.
54
Cont’d…
 Procedures
 Are statements that detail the exact manner
in which certain activities must be
accomplished
 Put the presses order of activities to be
carried out to do a task
 Are chronological sequences of required
actions
 Provide detailed step by step instructions as
to what should be done
 Example: material procurement, university
admission, bidding etc.
55
 Cont’d…
 Single use plans:–
 are aimed at achieving a specific goals & will
dissolve when the goal has been accomplished
 They are designed to accomplish a specific
objectives usually in a relatively shorter period of
time & non repetitive
 They are detailed courses of action that probably
will not be repeated in the same form in the future
 Example- a plan to build a new warehouse-location,
placing a man on the moon, etc.
 The major types of single use plans are programs,
projects, & budgets

56
 Cont’d…
Program:
 Is a comprehensive plan that coordinates a
complex set of activities related to a major
non-recurring goals
 Is a complex of goals, policies, procedures,
rules, task assignments, resources to be
employed & other elements necessary to
carryout a given course of action
 Note: single use plan may use
standing plans & other single use plans to
be effective
 Single use plan = standing plans
+ single use plan
 A program may be 57
repeated with
Cont’d…
Project:
 Is a plan that coordinates a set of limited
scope activities that are non-recurring goals
 Project are the smaller & separate portion of a
program
 Each project has limited scope & distinct
directives concerning assignment & time
 Each project will become the responsibility of
designed personnel who will be given specific
resources & deadlines
58
Cont’d…
 Example: building a warehouse can be taken
as a program
 Typical projects might include:
 The preparation of layout drawings
 A report on labor drawings
 Transferring stock from existing facilities to
the new installation

59
Cont’d…
Budget:
 Is statement of expected results expressed in
numerical terms
 Is a statement of financial resources set
aside for specific activities in a given period
of time
 Is a single use plan that commits resources
to an activity over a given period
 May be expressed in monetary units, labor
hours, unit of products. Machine hours, etc.
 Is also used as a control device
60
Reading Assignment

Management By Objective

61
Management Theory and
Practice

Decision making

62
1. Meaning of Decision making
 Decision Theory
 Decision making can be defined as the process
of choosing between alternatives to achieve a
goal.
 Decision making is a conscious human process
involving both individual and social
phenomenon based upon factual and value
premises which concludes with a choice of one
behavioral activity from among one or more
alternatives with the intention of moving
toward some desired state of affairs.
63
Cont’d…
 Decision Theory
 Decision making is the process of
identifying problems and opportunities,
develop alternative solution, select best
alternatives and implement it.

64
 Cont’d…
 It is part of all managers’ job and common
core to other functions.
 For instance, top level management makes
decision on dealing with mission of
organization and its strategies.
 Middle level management, focus on
implementing strategies, budgets and
resource allocation.
 First level management deals with repetitive
day to day operations
65
 Cont’d…
 Decision making has three elements
 when manager make decisions; they are
choosing or selecting from among
alternatives
 when manager make decisions; when there
are no alternatives, there is no decision-
making , rather it become mandatory
 When managers make decisions, they have
purpose in mind. The purpose in mind is
organizational objectives.
66
2. Decision Making Process
1.Awareness of the problem (Define
the problem)
 The manager needs to become aware
that a problem exists and that is
important enough for managerial
action
2.Identifying the limiting or critical
factors
 Time, personnel, money, facilities……

67
Cont’d…
3. Developing Potential Alternatives
 Developing alternative solutions to the
problem guarantees adequate focus and
attention on the problem.
 It helps managers to fully test the
soundness of every proposal before it is
finally translated into action.

68
Cont’d…
4. Analyze / Evaluate the Alternatives
 The consequences of each
alternative would also be considered.
5. Select the Best Alternative
 The following four criteria are commonly
used for making the right choice among
available alternatives:
 The risk
 Economy of effort
 Timing
 Limitation of resources
69
Cont’d…
6. Implement the Decision
 The manager must feed-back
seek regarding the
effectiveness.
7. Evaluate and Control
 The system should provide feedback.

70
3. Types of Decisions
 Managers are evaluated by the
decisions they make and, more often,
by the results obtained from their
decisions.
 Managers are usually involved
making two types of in decisions
indicated below. as

71
Cont’d…

1. Programmed Decisions
 A programmed decision is one that is
routine and repetitive.
 Rules and polices are established well
in advance to solve recurring problems
quickly.

72
Cont’d…

2. Non-programmed Decisions
 usually deal with unstructured problems
 Deciding how to restructure
an organization, to improve
efficiency,

73
4. Decision Making Conditions

 A decision-maker may not have

complete knowledge about decision
alternatives (i.e., High Problem,
Complexity) or about the outcome of
a chosen, alternative (i.e., High
Outcome Uncertainty).

74
Cont’d…

 These conditions of knowledge are

often referred to as states of nature
and have been labeled:
 Decisions under Certainty.
 Decisions Under Risk
 Decisions under Uncertainty

75
A. Decision Making Under
Certainty
 A decision is made under conditions of
certainty when a manager knows the precise
outcome associated with each possible
alternative or course of action.
 In situations, there is perfect
such about alternatives and
knowledge
consequences. their
 Exact results are in advance
complete
known (100 per cent) with certainty.
probability of specific outcomes is assumed
The to
be equal to one.
76
Cont’d…

 A manager is simply faced with

identifying the consequences of
available alternatives and selecting
the outcome with the highest benefit
or payoff.
 In practice, managers rarely operate
under conditions of certainty. The
future is only barely known.

77
B. Decision Making Under Risk
 A decision is made under conditions of risk
when a single action may result in more
than one potential outcome, but the
relative probability of each outcome is
known.
 Decisions under conditions of risk are
perhaps the most common.
 In such situations, alternatives are
but their resulting
recognized,
consequences are probabilistic and
doubtful. 78
Cont’d…
 While alternatives are clear, the
the
consequence is probabilistic and doubtful.
Thus, a condition of risk may be said to
exist.
 In practice, managers assess the likelihood
of various outcomes occurring based on past
experience, research, and other
information.
 A quality control inspector, for example,
might determine the probability of number
of `rejects' per production run.
79
C. Decision Making Under
Uncertainty
 A decision is made under conditions of
uncertainty when a single action may result
in more than one potential outcome, but the
relative probability of each outcome is
unknown.
 Decisions under conditions of uncertainty
are unquestionably the most difficult.
 In such situations a manager has no
knowledge whatsoever on which to estimate
the likely occurrence of various alternatives.

80
Cont’d…
 Decisions under uncertainty generally
occur in cases where no historical data
are available from which to infer
probabilities or in instances which are so
novel and complex that it is impossible
to make comparative judgments.
 Selection of a new advertising program
from among several alternatives might
be one such example.

81
5. Models of Decision
Making Process
 There are three suggested models of the
decision making process which is about
how decisions are made and should be
made.
 Each model differs on the assumptions it
makes about the person or persons
making the decision

82
Cont’d…
 These three models are:
 The econologic or the
model, economic man,
 The bounded rationality model or the
administrative man; and
 The implicit favorite model or
the gameman.

83
A. Econologic Model or Economic
Man Model
 The econologic model represents
the earliest attempt to model decision
process.
Briefly,
 assumptions: this model rests on
two
 It assumes people are economically
rational; and
 That attempt to maximize
people
outcomes in an orderly and sequential
process.

84
B. Bounded Rationality Model or
Administrative Man Model
 The bounded rationality model, also
known as the administrative man
model.
 It assumes that people, while they may
seek the best solution, usually settle for
much less because the decisions they
confront typically demand greater
information processing capabilities than
they possess.

85
 Cont’d…
 The concept of bounded rationality attempts to
describe decision processes in terms of three
mechanisms:
 Sequential attention to alternative
solutions: People examine possible solutions
to a problem sequentially.
 If the first solution fails to work it is discarded
and the next solution is considered.
 When an acceptable (that is, `Good enough'
and not necessarily the best') solution is
found, the search is discontinued.
86
Implicit Favorite Model or Gamesman
Model
 This model deals primarily with
non- programmed decisions.
 Non-programmed decisions decisions
are
that are novel or unstructured.
 The implicit favorite model by
developed
Soelberg (1967) emerged when he
observed the job choice process of
graduating business students and noted
that, in many cases, the students identified
implicit favorites very early in the recruiting
and choice process.
87
Cont’d…
 However, they continued their search for
additional alternatives and quickly
selected the best alternative candidate,
known as the confirmation candidate.
 Next, the students attempted to develop
decision rules the demonstrated
unequivocally that the implicit favorite
was superior to the alternative
confirmation candidate.

88